House's Draft FY2012 Spending Bill Would Restrict Pell Eligibility

Eligibility for Pell Grants would be restricted to reduce program costs by $3.6 billion next year under a draft spending bill for fiscal year (FY) 2012 released by the House Appropriations Subcommittee on Labor, Health, Human Services and Education yesterday.

The draft legislation proposes spending levels for Education Department programs for the 2012-13 award year and would:

Maintain the maximum Pell Grant award at $5,550

Reduce lifetime eligibility to 6 years down from 9 years for all Pell recipients (no grandfather rule)

Revoke Pell eligibility for students who attend school less than half-time

Eliminate Ability to Benefit option to establish general eligibility for Title IV funds (both the testing option and the six earned credits option)

Reduce income threshold to qualify for an automatic zero EFC to $15,000, down from $31,000

Eliminate Pell awards to students whose EFC would result in an award less than 10 percent of the maximum award (currently, students whose calculated award would be at least 5 percent but < 10 percent of maximum are bumped up to the minimum 10 percent of maximum)

Reinstate previously excluded forms of untaxed income, which are:

The amount of additional tax credit claimed for tax purposes

Welfare benefits

Earned income credit claimed for tax purposes

Credit from tax paid on special fuels

Untaxed social security benefits

Foreign income exclusion

In addition, the Education Secretary would need to establish a schedule of reductions to the Pell Grant Payment Schedules in the event that FY 2012 appropriations are insufficient to fully fund the program. The bill allows the Secretary to choose among a fixed percent, variable percent, or fixed dollar reduction to awards.

The proposed legislation would provide the same level of funding for the Federal Supplemental Opportunity Grant (SEOG) and Federal Work Study (FWS). Funding for the TRIO and GEAR UP programs would also be maintained at last year's level. The bill would also prohibit expenditure of any funds by ED to implement, administer, or enforce the program integrity regulations relating to gainful employment, state authorization, or credit hour definition, nor may funds be used to develop new regulations pertaining to the definition of gainful employment or the application of that term.

"It is troubling that lawmakers continue to look for ways to decrease spending on federal student aid, but we are encouraged that the proposals in this spending bill take a more nuanced approach compared to earlier proposals that would have drastically and indiscriminately slashed Pell awards," NASFAA President Justin Draeger said in a statement.

The Republican-controlled House's FY 2012 Labor-HHS-Education spending bill differs greatly from the Democratic-controlled Senate's version of the bill that also maintains the maximum Pell Grant but doesn't tighten eligibility requirements. The Senate's bill calls for the elimination of the interest subsidy for undergraduates during the 6 month grace period and uses those savings to fill Pell Grant program shortfalls. Given that tomorrow marks the first day of FY 2012, this bill will likely not even see a Subcommittee mark-up. Instead, this sets the stage for debate between the two chambers (and the two parties) as Congress works to finalize 2012 spending before stop-gap spending legislation which was passed last week expires in November.

Overall, the proposed House bill provides $69 billion for all Department of Education programs, $2.4 billion or 3% less than in 2011 and $11.5 billion or 14% less than the President's budget request.

"Excessive and wasteful spending over the years has put many of the programs and agencies funded in this bill on an irresponsible and unsustainable fiscal path," House Appropriations Chairman Hal Rogers (R-KY) said in a statement. "To protect critical programs and services that many Americans rely on ... the bill takes decisive action to cut duplicative, inefficient, and wasteful spending to help get these agency budgets onto sustainable financial footing."